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Outlook for Queensland economy bleak

The short-term forecast for the Queensland economy is bleak, according to a leading Australian economist.

"‘I’m not wildly optimistic about the prospects for Queensland," Frank Gelper, chief economist for business research company BIS Shrapnel, said on Tuesday.

"Most people in this economy are not doing well," he said, pointing to small business as particularly suffering.

"Residential housing is the ray of hope in this but it is not enough in itself to solve our issues."

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Dr Gelper was in Brisbane on Tuesday to speak at the BIS Shrapnel annual economic forecasting conference.

He said as the mining boom that has underpinned Queensland’s finances for more than a decade continues to descend from its peak, unemployment was expected to rise above 6 per cent.

"‘The problem is jobs. We employ a lot more people in the production phase, as opposed to construction phase," he said.

However, unemployment would only spike in the short-term, Dr Gelper said, as other non-mining sectors recovered, fuelled largely by the fall in the value of the Australian dollar.

"The benefit of what is happening in Queensland is the downturn in mining has brought an initial fall in the Australian dollar," he said.

"‘Queensland is a diversified state, with agriculture, tourism and some service industries all directly affected by the dollar, so when it falls, that will underwrite increases in those areas.

"While the mining sector has been booming and Queensland has been booming, those things were in recession.

"Now it switches."

Despite the gloomy outlook, Dr Gelper said there were no signs a recession was imminent.

"The economy will be softer over the next five years than it has been in the last decade but it is not going to fall in a heap," he said.

"‘There won’t be a recession and the reason is, number one, the housing recovery coming through but more importantly, the very strong increases in mining capacity, production and exports are underpinning the economy.

"At the moment we are seeing the fall in mining investment and the beginnings of patchy recovery in the housing market.

"‘But until we see non-mining business investment chime in, that’s about two years away.

"We are still waiting for structural change in the economy.

"Housing is the first cab off the rank.

"We need to broaden the base in this recovery and that will take a while."

Dr Gelper said with the first tentative signs of recovery in the residential housing market, he believed the Reserve Bank of Australia would make no further interest rate cuts.